Canada Infrastructure Bank (CIB) recently appointed a new president and CEO, Pierre Lavallée, and will soon have its operations team in place. Lavallée has some new ideas about how to best allocate funds for new municipal infrastructure projects, and though the exact details are still hazy, municipalities can start to see the way forward forming.

Lavallée is investigating another finance option, beyond traditional banks, provincial low-interest loans, and P3s, that will help municipalities and water utilities that are scrambling to address ailing infrastructure, achieve the Wastewater Systems Effluent Regulations (WSER), and meet the demands of climate change.

“The CIB’s mandate, as Lavallée explained, will be to look for projects that can generate revenue based on user fees, such as water charges, that are of interest to global investors, but also carry risks or whose revenues are insufficient to make the outside investment viable, without the help of the bank.”

Historically, international private investors have only invested in municipal water assets after the community adopted full-cost accounting and metering of water use. In Canada today, most municipalities do not have sustainable financing schemes in place for their water-related assets. In addition, most Canadians are not used to paying the full cost for water services and there is a resistance to hike rates.

Moving forward, the CIB will require a sustainable accounting scheme for any project seeking investment. When municipalities are developing these plans, they must account for a few critical factors to avoid deficits: inflation, system growth, service enhancements, interest expenses, customer care, and source water protection. Important external factors, such as rising energy costs and the likely impacts of climate change-related events, must also be addressed.

Essentially, users will be charged for their water consumption and this revenue will be directed towards financing the maintenance and operations of the facilities. The accounting scheme will allow user-generated revenues to provide a stream of income that private investors would find attractive enough to invest in.

Although the specific details for how each project will be evaluated have not been created yet, Lavallée emphasizes that things like how well investments align with governments priorities, sustainability factors, and greenhouse gas reduction benefits will be included in the analysis.